Overall overview of GIS instrument its developments and

Overall overview of GIS instrument, its developments and prospects for the Russian Federation Alexander Averchenkov World Bank, Consultant Moscow carbon Forum 2008 April 28 -29, 2008

Outline n n Growing interest to GIS instrument concept and its development n GIS prospects in Russia n Carbon Finance Development Project

Recent news from Point Carbon n 28. 02. 08 Ukraine aims for 20 -million AAU pilot deal by May… n 18. 03. 08 Japan to buy Polish AAUs… n 26. 03. 08 Hungary sees rush of AAU buyers: EBRD suggested to by AAUs from the country… n n 15. 04. 08 Japan and Russia have agreed to start talks on an agreement concerning Japan’s purchases of some of Russia’s surplus AAUs… 21. 04. 08 Ukraine is leading in the rating on AAUs trading, followed by Czech Republic and Hungary…

Important developments n Hungary completed GIS legal frame –effective since January 1, 2008 n Latvia intends to sell 5 -10 million of its AAUs in 2008 n Ukraine published draft project selection criteria for GIS financing n Romania signed Mo. A with the Netherlands n GIS sessions at Carbon Expo 2008, other carbon forums and conferences n Research and analytical projects on GIS: REC, NDRC, Yale and New York Universities

The GIS concept origination n n National Strategy of the Russian Federation in GHG Gas Emission Reductions (1998 -1999) links AAUs trading to “green investments” Policy statement of the Russian delegation at COP- 6 (2000) on an intention to invest revenues from AAUs sale in climate friendly projects

Key international studies on GIS concept development n n n Climate Strategies: study on the Russian Green Investment Scheme (2002) OECD and IEA: Green Investment Schemes: Options and Issues (2003). World bank: Options Study on Designing a Green Investment Scheme for Bulgaria (2004) Regional Environmental Center: Developing a Green Investment Scheme in Romania (2006) World bank: Options Study on Latvia’s Participation in International Emissions Trading (2006) World bank: GIS Options Study for Ukraine (2006)

Green Investment Scheme: Generic outline Greening reports Buyer Host Government AAUs Government $ $ GIS Legislative base Revenues earmarking Criteria for project selection $ Instruments Revenues allocation Verification Energy supply Industry emission reductions/environmental benefits E Eff. buildings Other: “hard” and “soft” 2008 2012 2020

National specifics in GIS design Design features Ukraine Latvia Hungary Russia (GIS study) (Law) Hypothesis Legal basis Law or Gov. resolution Law + Gov. resolution Inter gov. Agreement Revenues earmarking process budget process or budget fund budget process, special account in the Treasure Ministry special account Decision on revenues allocation Governmental agency Fund under a Ministry Minister Government+ Buyer/Intermedi ary Criteria on selection and “greening” soft hard, legal and financial additionality hard Instruments To be defined Performancebased grants subsidies Verification third party ISO 14064, or third party, or ministerial unit designated third party

Anticipated differences in consequence of actions In CEE countries and in Ukraine 1 step: Political decision on AAU management, approval of selection criteria 2 step: GIS establishment (Legal and institutional) 3 step: Search of Buyers In Russia 1 step: Search of interested Partners/AAUs Buyers 2 step: Selection of companies or sectors for support from GIS revenues 3 step: Mo. U and ERPA approved by the Gov-t; 4 step: Mo. U and Forward ERPA 4 step: pilot GIS (bilateral) 5 step: Selection of projects/programs for support from GIS revenues 5 step: Political decision on AAU management and GIS establishement

Managing AAUs Kyoto target Mln ton CO 2 E Reserve JI projects Surplus AAUs (potentially tradable) GIS or AAUs Banking New target Mandatory setasides (non tradable 1990 1995 2000 Compliance 2005 2008 2010 2012 2015 2020

Managing AAUs through banking Kyoto target Mln ton CO 2 E Limit for JI projects Surplus AAUs (potentially tradable) AAUs Banking or GIS Reserve due to AAus banking New target Reductions due to JI Mandatory setasides (non tradable 1990 1995 2000 Compliance 2005 2008 2010 2012 2015 2020

AAUs banking pros: n n n Some consider AAUs banking for post-2012 period as more attractive than selling it now; Due to the high oil prices the Russian Government does not need new revenues at the moment; AAUs banking is seen as automatic transfer of quota to the post-2012 period, which allows: - keeping opportunities for extensive economic growth; - getting a better price; - avoiding implementation risks and mistakes in ET; - learning lessons from other countries;

AAUs banking cons n n Unclear prospects for the Kyoto Protocol and the Marrakesh Accords; Most probably, new post-2012 commitments will take into account “national circumstances”, i. e. they are to be fair, achievable, but demanding n Russia is unlikely to get such extra comfortable target as in Kyoto; n AAUs banking does not provide any incentives for EE, RER development, and other low carbon measures; n AAUs banking could be seen as a temporary tool to continue energy-inefficient development

Managing AAUs through GIS Kyoto target Mln ton CO 2 E Limit for JI projects Surplus AAUs (potentially tradable) Mandatory setasides (non tradable 1990 1995 2000 AAUs Banking or GIS Compliance 2005 2008 2010 2012 New target Reductions due to JI implementation Reductions due to GIS implementati on 2015 2020

Advantages of GIS for Russia n n Purchase of technologies, managerial and institutional knowledge, Immediate facilitation of EE measures and RER development; GIS – instrument to lower a long-term energy demand in some sectors Additional financial revenues

Structure of the Carbon Finance Development Project (CFDP) n n Module 1: Capacity Building of Focal Points for JI and IET Module 2: Assessment of Russia's Potential for GIS Module 3: Designing of a Green Investment Scheme (GIS) Module 4: Developing Expert Capacity and a Portfolio of Projects for GIS and JI

Partners in CFDP implementation n MEDT and other ministries and agencies, regional administrations Russian financial institutions, banks, private companies and state corporations UNDP/EBRD: Umbrella Programme for Promoting Energy Efficient Technologies and Practices in the Russian Buildings Sector recently submitted to GEF n Natural Resources Defense Council/ Yale Uni and New York Uni: Study of GIS and Programmatic JI

To be competitive Russia’s AAUs must be “super greened” Priority areas : n Modernization and reconstruction of district heating systems § Energy Efficiency § Renewable energy development “Greening” Olimpic Games in Sochi ?

“Green Olympics” concept in China n n about 90% of all the hot water in the Olympic village will be solar heated 80 to 90% of street lights around the Olympic venues will be solar powered; 130 KW solar photovoltaic system for the main Olympic stadium. wind farms to supply power during the Olympics (~80 Mw)

Thank you very much for your attention! Email: aaverchenkov@rambler. ru